The media has made much of China’s decelerating industrial production and export figures and given the heightened state of uncertainty caused by the Trade War with the US administration, this is to be expected. But for at least the past decade, authorities in Beijing have been trying to restructure the economy away from production and towards consumption. To the extent that goods are manufactured in China, emphasis has been on higher value goods more than the volume produced. So the Trade War in one sense encourages the authorities on this path with an even greater sense of urgency than previously. The Consensus Economics mean forecast for nominal retail sales this year is lower, but still robust: 9.0% and with further deceleration of growth to 8.7% in 2020.
Data points through end of January 2019. Change represents month-over-month change.
The monthly residential price index of 70 major Chinese cities, shows the majority (47 cities) recorded MoM price increases in December 2018. But a growing number (22 cities) saw MoM price falls and the remaining city recorded no price change. The cycle of successive MoM price growth in the majority of major cities has been a very long one – extending for three full years already. This is largely due to strong demand from the urban middle class and their aspirations for higher living standards. With the pace of GDP growth falling, a key question is the extent to which this large sector is a favored route to stimulate growth. Recently, household income tax cuts were announced which should help buoy household consumption and the demand-side drivers of housing.
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